UA Health Network board, regents OK Banner partnership

The ER at University of Arizona Medical Center’s main campus on North Campbell Avenue.

Both University of Arizona Medical Center hospitals could soon be rebranded to include the name Banner.

The governing board of the state’s public universities and the UA Health Network board gave unanimous support Thursday to a Banner Health partnership with the UA College of Medicine, as well as a Banner acquisition of the private, independent UA Health Network, which includes the two local teaching hospitals.

The Arizona Board of Regents and the Tucson-based UA Health Network board voted at a special meeting in Tucson. Officials touted the deal as a way to stay competitive in the U.S. health-care market, which is increasingly being dominated by large health systems.

“This day is about confronting our realities,” UA Health Network Chief Executive Officer Michael Waldrum said during the meeting. “The University of Arizona Health Network, which is a Southern Arizona-based healthcare delivery system, cannot meet its objectives on its own. It is not possible to meet those outcomes.”

Under terms of the draft agreement, Banner Health would acquire the UA Health Network, which has 6,300 employees. Those employees would be able to keep their jobs for at least six months after the deal is closed, the agreement says. Officials hope to complete the transaction by the end of the year.

“I’m especially pleased that this proposed transition will infuse stability and energy into our organization,” Waldrum said. “Ultimately we’re moving from a situation in which we can only maintain status quo to a situation in which we can create a premier academic medical center.”

The deal would make Banner Health the largest private employer in Arizona with more than 37,000 employees, officials said. The nonprofit company operates 16 Arizona medical centers, plus 12 in other states. It was created in 1999 through a merger between North Dakota’s Lutheran Health Systems and Phoenix-based Samaritan Health System. Banner Health does not currently operate any hospitals south of Casa Grande.

The UA Health Network was created in 2010 through a merger between University Medical Center Corp. and University Physicians Healthcare. Its beginning was marked by turbulence and chaos: In its first four years, the network has had four chief executive officers. Waldrum, the fourth CEO, has been with the network since January 2013.

The local hospitals Banner would gain are the two campuses of the UA Medical Center — the university campus at 1501 N. Campbell Ave. and its south campus at 2800 E. Ajo Way, which used to be known as Kino Hospital.

Banner President and Chief Executive Officer Peter S. Fine, who wore a red UA tie to the meeting, said the hospital names would include “Banner” but there are no decisions on the hospitals’ full future names.

One other matter that needs to be worked out is the electronic health records. The UA Health Network recently completed implementing a $115 million electronic medical records system. The network experienced unprecedented losses this fiscal year and said the new electronic records system was largely to blame.

But the UA Health Network uses a system called Epic. Banner uses a system called Cerner. Waldrum said Epic and Cerner are the two largest electronic health records products in the market, and that he expects the issue will be successfully resolved.

In addition to taking over operations of both hospitals, Banner would acquire other UA Health Network assets — clinics, health plans and a physician practice plan that staffs the teaching hospitals with doctors from the UA.

The agreement says Banner would eliminate the network’s $146 million debt, purchase the UA Medical Center land for $21 million, and invest $500 million into the medical center and build new facilities as needed within five years.

Other financial obligations in the draft agreement include a $300 million payment from Banner to create an endowment to support clinical and translational research. Banner would also agree to continue “key services and programs provided to Tucson” for a period of five years after the final deal is signed.

Since the UA Health Network has such a close working relationship with the UA, the agreement says Banner Health will be partnering with the university and providing financial support to the UA College of Medicine, which educates future doctors at campuses in Tucson and Phoenix.

“We are going to make the future. We are not going to be the recipients of a future made by others,” UA President Ann Weaver Hart said during the meeting. “This is extremely exciting. I hope you can feel our commitment.”

The UA College of Medicine began in Tucson in 1967 and added a Phoenix campus in 2006. The UA partnership with Banner calls for a 30-year academic affiliation agreement that would transition Banner Good Samaritan Medical Center in Phoenix into a faculty-based academic medical center to support the UA College of Medicine in Phoenix.

Hart said there are no plans to increase the size of the Phoenix campus of the medical school into a larger entity than the flagship Tucson-based medical school.

The deal will transform health care in Arizona by creating a statewide organization, Waldrum said. He said the process to sell to Banner was “deliberative, long and thoughtful.”

Banner, the UA and the UA Health Network will now work toward a definitive agreement, officials said.

Tucson Mayor JonathanRothschild said that from what he knows, Banner has good financial strength.

“I would welcome Banner Health and its investment in the community,” Rothschild said. “As is often the case when a new company comes to town, we want to assume they’ll be good corporate partners and work with the community.”